2018 (6) TMI 712 - AT - Service Tax

Management, Maintenance and Repair Service - benefit of N/N. 12/2003 ST dt.20.6.2003 denied - denial on the ground that the assessee has not produced any documentary proof indicating the value of the materials - Held that - The notification provides that the service provider has to produce documentary proof indicating the value of goods and materials sold. In the contract, the rate has been fixed including the cost of materials/labour charges and service charges. On such score, the appellant is definitely eligible for exemption of the value of the materials sold to the service recipient/client while undertaking the maintenance or repair service - the matter requires to be remanded for verification and extending the benefit of N/N. 12/2003. Benefit of cum tax - Held that - Even in the SCN, it is stated that the appellant has not collected service tax. Therefore it is clear that the assessee has been raising invoices without charging service tax - the Commissioner (Appeals) has rightly allowed the benefit of cum-tax to the assessee. Time Limitation - Held that - The assessee was not aware of the liability to pay service tax and that there was no intention to evade payment of tax, as the entire demand was made from the figures/documents produced by the assessee - extended period not invocable. Appeal allowed in part and part matter on remand.

Summary

Issues:
1. Interpretation of Notification 12/2003 ST regarding deduction/exemption of material value in service tax.
2. Benefit of Cum-tax in service tax calculation.
3. Application of extended period for demand of service tax.
4. Imposition of penalties for non-payment of service tax.

Analysis:

Issue 1: Interpretation of Notification 12/2003 ST
The appellant provided Maintenance and Repair Services without collecting service tax. The Commissioner (Appeals) reduced the demand but did not consider Notification 12/2003 ST for material value deduction. The appellant argued for the notification's benefit based on the Supreme Court's decision in Safety Retreading Co (P) Ltd vs. Commissioner of Central Excise. The Tribunal agreed, remanding the case for verification and extending the notification's benefit to the appellant.

Issue 2: Benefit of Cum-tax
The department contended that the appellant did not collect service tax, but the Commissioner (Appeals) allowed the benefit of Cum-tax. The Tribunal upheld this decision, stating that the appellant was entitled to the benefit, dismissing the department's appeal on this ground.

Issue 3: Application of Extended Period
Regarding the invocation of the extended period for demand of service tax, the department argued that the appellant's non-registration and non-filing of returns justified the extended period. However, the Tribunal found no merit in this argument, upholding the Commissioner (Appeals) decision to set aside penalties, noting that the appellant provided a reasonable explanation for the failure to pay service tax.

Conclusion:
The Tribunal partly allowed the appellant's appeal, remanding it for reworking the demand with the benefit of Notification 12/2003 ST. The department's appeal was dismissed. The penalties were set aside as the appellant provided a reasonable explanation for non-payment of service tax.